BANK of England rate-setters mulled extending their flagship Funding for Lending Scheme (FLS) to give an extra boost to lending in their April meeting, minutes published yesterday revealed.
“The [monetary policy] committee (MPC) saw merit in possible extensions to the FLS that would boost lending further,” the minutes read.
The minutes also revealed that the Bank once again voted unanimously against any change in interest rates, and six to three against an addition to quantitative easing (QE) past its current £375bn target.
As in February and March, governor Mervyn King, with David Miles and Paul Fisher, favoured buying an extra £25bn of gilts, to further expand the monetary base, whereas both deputy governors and all three external members voted against any further easing.
“Though the minutes acknowledge the change of remit, in the short-term this appears to have made little difference with the vote being unchanged,” said Item’s Nida Ali.
“In any case QE has already passed its sell-by date – it is distorting financial markets without affecting interest rate expectations or spending,” Ali claimed.
Despite inflation staying above target for 40 successive months, the minutes showed that the Bank still thinks it will meet its two per cent target in the medium term – but not in the next two years, when it forecasts price rises to average well above target.
The Bank said that to do anything but “look through” this extended period of above-target inflation would jeopardise the already weak economic recovery.